Regulatory capital is the biggest driver of divestments in the insurance sector, according to a study by Ernst & Young.

Insurers are selling businesses to reduce the amount of capital required to support less profitable or legacy segments, it says.

About 43% of banks and insurers cite increased capital requirements as their motivation for quitting businesses.

Changing solvency rules have prompted insurers to focus on capital levels.

“This has led to insurers identifying potential closed and run-off book divestments, as well as the sale of open businesses containing large, long-term legacy portfolios, such as annuity businesses both in North America and Europe,” Ernst & Young says.

The largest barrier to disposals is the complexity involved.

Ernst & Young commissioned interviews with 800 executives for its global corporate divestment study. More than 10% were from financial services sectors.